STARTING THE BUSINESS

When looking to start a business around her empanadas, Angie first considered a large-scale rollout of pre-packaged empanadas for grocery stores and big-box retailers but quickly realized that option was premature. She then decided to explore the possibility of a smaller-scale rollout, selling empanadas to local restaurants.

At the same time, she was perfecting her recipes and estimating costs. She identified a few fully equipped kitchens she could rent for between $700 and $2,000 a month, depending on size, equipment, and location. She also estimated the cost of other items, including ingredients, labor, trays, utilities, and delivery. Then she classified each cost as fixed, variable, or mixed based on the advice of her accountant. After some additional market testing and interactions with potential clients, Angie prepared a six-month budget (see Table 1).

Table 1 : SIX MONTH BUDGET APRIL SEPTEMBER APRI JUNE JULY AUGUS SEPTEMBER TOTAL Trays sold 300 500 650 1,100 3. 350 ales revenue $3 450 $4 025 85 , 17 $5, 750 $7 , 475 $12, 650 $38 , 525 Cost of sales Ingredients 8725 $845 $1 087 81 207 $1. 570 $2657 $8 091 Labor 1 035 208 1552 379 17. 558 Tray 135 195 330 1005 Rent 000 OOO 1000 1000 1000 1000 6000 Utilities 125 835 Delivery 650 700 800 850 1000 450 5 450 Total cost of sales $3 621 $3 983 $4.70 $5 067 $6 154 $9 409 832 939 Operating profit $ (170 ) $42 $470 $68 $1 321 83. 247 85 58 NOTE - MIXED COSTS VARIABLE COST PER TRAY FIXED COST PERMONTH Utilities 50.0 $100 Delivery $7.00 $350Table 2 ACTUAL RESULTS APRIL - SEPTEMBER APRIL JUNE JULY AUGUST SEPTEMBER TOTAL Trays sold 340 290 Sales revenue 53.450 $3 910 85 , 405 $7 728 89 747 $14, 835 $45 069 Cost of sales Ingredients $725 8901 87 . 214 $7 760 $2 212 83. 255 $10 067 Labor 1.139 784 2.550 3 , 214 4 896 14 873 Trays 202 387 1 .176 Rent 1000 OOO 1.000 1000 1000 1000 6000 Utilities 190 Delivery 865 056 6058 Total cost of sales $3740 $4, 124 85 , 17 $6 715 $8 078 871 27 $39 048 Operating prof ($290) ($214 ) $289 $1 013 $1 6 63 83 560 $6 021 NOTE - MIXED COSTS ACTUAL FIXED COST PER MONTH Utilities $100 Delivery 8350Table 3: ACTUAL INGREDIENT COST BY TYPE AND SALES MIX BY MONTH PERUVIAN ARGENTINIAN QUANTITY VEGETARIAN (CHICKEN) (BEEF) April 300 20% 40% 40% May 340 5% 45% 50% June 470 10% 42% 48% July 672 8% 42% 50% August 847 8% 43% 49% September 1,290 12% 44% 44% Total 3,919 10% 43% 47% Cost per tray $1.265 $2.300 $3.105